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Health, Disability Insurance and Retirement in Denmark

Author

Listed:
  • Paul Bingley
  • Nabanita Datta Gupta
  • Michael Jorgensen
  • Peder Pedersen

Abstract

There are large differences in labor force participation rates by health status. We examine to what extent these differences are determined by the provisions of Disability Insurance and other pension programs. Using administrative data for Denmark we find that those in worse health and with less schooling are more likely to receive DI. The gradient of DI participation across health quintiles is almost twice as steep as for schooling - moving from having no high school diploma to college completion. Using an option value model that accounts for different pathways to retirement, applied to a period spanning a major pension reform, we find that pension program incentives in general are important determinants of retirement age. Individuals in poor health and with low schooling are significantly more responsive to economic incentives than those who are in better health and with more schooling. Similar gradients in outcomes and behavior by health and schooling partially reflects the less educated having poorer health on average, but also that the less educated have worse job prospects and higher replacement rates due to a progressive formula for DI and other pension benefits.

Suggested Citation

  • Paul Bingley & Nabanita Datta Gupta & Michael Jorgensen & Peder Pedersen, 2014. "Health, Disability Insurance and Retirement in Denmark," NBER Working Papers 20114, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20114
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    Cited by:

    1. Paul Bingley & Nabanita Datta Gupta & Peder J. Pedersen, 2016. "Health Capacity to Work at Older Ages in Denmark," NBER Chapters,in: Social Security Programs and Retirement Around the World: The Capacity to Work at Older Ages, pages 85-110 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I1 - Health, Education, and Welfare - - Health
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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